Proven oil reserves [in Russia] are 106 billion barrels, that is around USD 6 trillion according to current market prices. Forest reserves are estimated to reach 83 billion cubic metres. If we multiply it by the average market price of round timber, around USD 70, it is also 6 trillion. But while oil is formed over 100 million years, a good tree needs 100 years to grow. So, it is interesting to find a way to make this important economic and ecological resource more valuable and more sustainably used in our economy — Alexey Chekunkov, Chief Executive Officer, Far East and Baikal Region Development Fund.
The prime cost of Finnish products that are delivered to the global pulp market and to consumers is around USD 500 per tonne of pulp. In Russia, given the prime cost and potential of Russian timber, we can offer the cost of USD 350. If we started developing this industry in Russia, we could squeeze the Finnish out and have 20% of the pulp market instead of current 2% — Mikhail Shamolin, President, Chairman of the Board, Segezha Group .
Globally, over the last five years the growth of the forestry sector reached 3% per year, and it corresponds to the global GDP growth rate. In Russia, over the same five years, the forestry sector growth was faster than GDP growth, mostly due to the export. In the Far East this also was the case in a number of segments — Igor Prutov, Partner, Transaction Advisory Services, EY.
We can see the potential of the industry. Last year the amount of investment in Russia was RUB 165 billion of capital expenditure, which is, according to different estimates, from 0.13% to 0.14% of GDP. In Finland it is four times more. So, there is room for improvement — Vladimir Sitnov, Senior Vice President, Sberbank.
Decree number 1520 of the Government of the Russian Federation was adopted, related to the timber processing in the Far East. Also, a tariff quota was introduced for export of round timber of Far Eastern species, exclusively for enterprises that have set up processing capacities and have been exporting timber products. <…> In the first six months of 2019, the amount of unprocessed timber export decreased by almost 25% — Viktor Evtukhov, State Secretary and Deputy Minister of Industry and Trade of the Russian Federation.
Now in many countries timber is transported as logs, and their deep processing results in waste – chips and remaining materials. In order to work with this waste, we are discussing these projects with the Far East Investment and Export Agency. <…> We plan to import timber from the Southeast Asia to Nakhodka, Vanino or Vladivostok and there process these materials, with amounts exceeding 500,000 cubic metres — Kazuhisa Hara, Executive Advisor, EREX Co..
Various state data bases provide very different information. As for the forest management, these are mainly 10–20-year old documents that make it impossible to plan any business — Nikolay Nikolaev, Chairman of the Committee of the State Duma of the Federal Assembly of the Russian Federation on Natural Resources, Property and Land Relations .
The problem of pricing transparency, transparency of the information source that exists in the industry, is really important. <…> As a result, no more than 10 out of 100 applications are ready for financing with the total of RUB 50–60 billion. Sometimes the prices for raw materials and end products are unreasonable; sometimes expectations do not correspond to forest ratios; sometimes processing resource is not confirmed by the source at the product entrance – this is not a bankable situation — Vladimir Sitnov, Senior Vice President, Sberbank.
Roads remain a sore spot in the Far Eastern forest industry. Quite a few forest areas are currently almost inaccessible. <…> Also, there is a problem of timber transportation by heavy trucks — Dmitri Valtfogel, Chief Executive Officer, RFP Group.
70% of the region is covered with forest, 18 million cubic metres of calculated cut, but the question is how to use it in a correct way. Today we only have 6 million cubic metres from the relatively accessible areas; all the rest is in places where roads and infrastructure need to be built first — Mikhail Churkin, Acting Deputy Chairman of the Government, Acting Minister of Investment Development, Government of the Zabaikalsky Territory.
We support the exchange mechanism and we understand that it provides us with more open and reliable information about cost of timber products. Perhaps it would not make sense if everyone goes to the exchange, but we could use the exchange mechanism for assessment, for correct taxation of those who sell their products at understated prices and those who try to sell stolen products at lower prices — Mikhail Klinov, Deputy Head, Federal Agency for Forestry.
We believe that introduction of a regulation for timber trade within the region would encourage transparent pricing: we would understand the real cost of timber and have better access to round timber for processing — Dmitri Valtfogel, Chief Executive Officer, RFP Group.
The project [timber trading] started in 2014. <…> At the moment, 24 regions and forestry enterprises of 24 regions have joined the project, with 12 of them actively working and others on their way. <…> I hope that the launch of export trading will balance the pricing. Generally, the pricing should be pretty much the same — Alexey Ryzhikov, Managing Director, Saint-Petersburg International Mercantile Exchange.
This is one of our most important strategic tasks. We have already started on it: the first amendment has been adopted requiring that regions publish information on forest areas — Nikolay Nikolaev, Chairman of the Committee of the State Duma of the Federal Assembly of the Russian Federation on Natural Resources, Property and Land Relations .
We are now taking steps to catch up and accelerate updating forest management materials using modern methods and technologies. <…> We rely on our ground activities and aerial photography to update the materials — Mikhail Klinov, Deputy Head, Federal Agency for Forestry.
We used satellite monitoring and neural networks. <…> The neural network uploads free satellite images, compares them and demonstrates online where forest has disappeared. <…> Based on that, we can analyze forestry activities – how intensive they are, where they are carried out, when they comply with forest declarations, and when they go beyond them — Kirill Berman, Minister of Information Technology and Communication of the Khabarovsk Krai.
We fully support the idea of forestry digitalization and its development. We are now carrying out research using space photography for specific projects in order to get all necessary data about forest areas — Maxim Duz, Deputy General Director, Far East Investment and Export Agency.
Last year we approved amendments to the Forestry Code introducing obligatory compensatory reforestation: we need to plant as much as we have cut. <…> We will now work on a regulation that would require that both state and market players head towards restoration of the consumed forest resource — Nikolay Nikolaev, Chairman of the Committee of the State Duma of the Federal Assembly of the Russian Federation on Natural Resources, Property and Land Relations .